Goldman Sachs Decides to Stay At Ground Zero

By JENNIFER STEINHAUER

Published: August 11, 2005

Goldman Sachs has agreed to build a $2 billion new headquarters across the street from the former World Trade Center site, reversing its decision this spring to abandon its building plans, according to city, state and company officials who have been briefed on the investment firm's plans.

The firm had balked earlier at building there after being dissatisfied with the security and traffic plans proposed by the state. Changing Goldman's mind, however, did not come cheap. Both the city and the state had to offer many new inducements that they did not present the first time.

Under the new agreement, which still requires approval of the firm's board, the city comptroller and some state authorities, Goldman would get at least $150 million in new city and state tax credits, as well as $600 million of new Liberty Bonds to add to the $1 billion in previously issued bonds, the officials said. Liberty Bonds, which reduce private borrowing costs at government expense, are intended primarily for commercial tenants in Lower Manhattan.

In addition, the city has agreed to change the streetscape around Site 26, where the two-million-square-foot office tower would rise on West Street. For example, the bike lane and sidewalk on the street would be narrowed to accommodate bollards to protect the building from truck bombs. The direction of traffic on Murray Street would probably be reversed to reduce the number of vehicles whizzing by.

The city and state were willing to make the concessions, however painful, because Goldman Sachs is not just any tenant. Officials have considered it crucial to revitalizing commercial downtown. The firm's decision is likely to encourage other businesses that have avoided coming into Lower Manhattan since the attack on the trade center, and officials hope its return will secure Lower Manhattan's primacy as a financial powerhouse.

''This is the biggest shot in the arm for downtown in a very long time,'' said Senator Charles E. Schumer, Democrat of New York, who has been highly critical of the lack of progress this year in Lower Manhattan. ''Hopefully, it is a harbinger of things to come. Businesses have been on hold waiting to see what Goldman would do. The only regret is that it took so long.''

Edward Skyler, the communications director for Mayor Michael R. Bloomberg, said the mayor has remained optimistic that Goldman would remain in Lower Manhattan, adding that discussions were continuing. Asked how the firm reached its decision, a spokeswoman for Goldman Sachs, Andrea Raphael, declined to respond. Joanna Rose, a spokeswoman for Gov. George E. Pataki, said, ''Talks are continuing, and we are making progress.''

Goldman, which has been the only major concern to agree to locate its headquarters at the trade center site, has worked on plans for an elaborate new headquarters for nearly a year. It hired the architectural firm Pei Cobb Freed & Partners to design a tower that would be distinguished from the older, boxy office buildings in the area.

The building would consolidate the 9,000 workers in Goldman's trading and sales operations, now spread over 10 offices in Lower Manhattan. The firm had hoped to start construction by 2008.

Those plans fell apart this spring, when, in numerous meetings with city and state officials, Goldman Sachs executives became deeply concerned that plans at the trade center site were badly stalled.

The firm was particularly rankled by the state's plan to bury West Street in a tunnel that would have ended at its headquarters' front door, creating an abundance of traffic and related security concerns. In April, after failing to persuade the state to abandon the tunnel idea, the investment firm pulled the plug on its plans, and hired a commercial real estate firm to begin scouting the city for a new location, possibly in Midtown.

The Pataki administration, facing criticism over Goldman's retreat as well as other stalled projects downtown, quickly moved to limit the damage. The governor made his chief of staff, John P. Cahill, the point man for all Lower Manhattan matters, including Goldman Sachs. He abandoned the tunnel idea. He pleaded with the firm to reconsider.

For his part, Mayor Bloomberg made several overtures to the firm's chairman, Henry M. Paulson, to come back to the bargaining table. He made weekly phone calls directly to Mr. Paulson, and met with him several times to make the case that Goldman was one of the city's most important corporate citizens and was needed downtown to help the city recover. ''I think frankly once people realized that there were going to be political consequences for it not happening, everyone got their act together,'' Mr. Schumer said.

Goldman, shaken by its own security concerns, asked for additional concessions. It wanted a safer streetscape, said two people involved in the negotiations, as well as financial incentives, since the delay had cost the firm money. Although the firm would have had trouble finding a Midtown site to meet its considerable space needs, city and state officials decided to take no chances and agreed to the requests. The company now plans to occupy its new site in 2009.